I read an interesting article called "Americans have a big disconnect about saving money" by Jill Cornfield on Bankrate.com today.
Ms. Cornfield writes "Bankrate's new survey finds that, for the first time, more Americans feel comfortable with their savings than feel uncomfortable. Yet they don't seem to be saving more. Compared to last year, there's been no improvement in the percentage who say they're not saving anything, and fewer people say they're putting away more than 10 percent of what they earn."
The gist of the article is that people in the survey feel better about their savings, yet have not been saving any more than in prior years.
I can list out the reasons, but they are the same ones that you would guess: 38% due to too many expenses, 16% haven't gotten around to it, 16% job isn't good enough (which is tied in with too many expenses), 13% too much debt, 5% "don't need to save more" and four percent "other."
The percentage of respondents who save more than 10 percent of their income has slipped, from 28 percent last year to 25 percent this year. Almost half of people save 5% or less of their income.
[caption id="" align="aligncenter" width="300"]
Source: Toonopedia[/caption]
It seems that middle- and upper-income people have a keeping-up-with-the-Joneses problem. We're talking about households with incomes of $50,000 and higher. Two in 5 of these respondents say the main reason they don't save more money is that they "have a lot of expenses."
Who doesn't have a lot of expenses?
I will share right now that my own family's monthly expenses typically range anywhere from a low of around $6,000 to twice that amount per month. If you are in the upper middle class or upper class (seriously, why would you read this if you are in the upper class?), that might not sound like that much, but to us middle classers, it is a nearly crushing amount.
If I fall off of the money-making treadmill, it would crumble fast.
[caption id="" align="aligncenter" width="400"]
Source: www.pinterest.com/thepeacefulmom[/caption]
Even with all of our expenses, I still manage to sock away some money. I am no spring chicken, mind you, but I have always tried to save a little, even when I was a young guy in my early thirties with two kids, a stay-at-home wife and trying to support a suburban lifestyle. I recall some months only being able to invest a hundred or two hundred bucks, but I continued investing more as my income rose.
Also, as you know if you have read previous posts, I drive a car that many folks would be embarrassed to, but I love it. It is a 1998 Subaru. We also still own tube TVs and use pay-as-we-go Tracfones. I do not want to come across as a cheapskate. We have gone on some pretty good vacations, we eat pretty well and we attend a lot of school-related and non-school-related events like concerts and plays.
So this Bankrate.com survey shows that respondents feel good about it at an all-time high for this particular survey.
"The Bankrate.com Financial Security Index reached a record high of 106.5. For the first time, respondents noted year-over-year improvement in all five things we measure to gauge Americans' financial well-being, including: comfort with their savings, comfort with their debt, net worth, job security and overall financial situation. Both men and women indicate improved feelings of financial security over the past year."
I cannot say that I feel this way. I have been reading that the average American who actually has retirement savings has in the range of $60,000. I sure don't have that much saved.
Yesterday's post referenced the 30% who consider themselves upper class (1.8%) or upper middle class (28%). The many people who I know in these income and social classes do, indeed, seem to feel fairly satisfied with their finances as far as I can tell. Higher income people in my workplace and the business owners and professionals that I know personally seem to be taking great vacations several times per year, I can see their new cars, I hear about the upgrades that they are doing with their homes, they get the newest iPhone every year, and their typical outfits cost more than my wardrobe. It must be nice.
On the flip side, the same bank promoting website, Bankrate.com, posted this article two short months ago claiming that six in ten Americans do not even have $500 in savings. How could this be?! Are you, my Dear Reader, in this boat that you could not even swing a $500 car repair? I have to pay for two car repairs in this range, most likely by the end of this month. And that is just the tip of the proverbial iceberg.
[caption id="" align="aligncenter" width="400"]
Source: www.autostraddle.com[/caption]
If you cannot come up with $500 in a pinch, but drive a newer car, just went on a Las Vegas vacation, own a high-definition TV or own an iPhone, shame on you!
My suggestion is that next time you are in a store or shopping on Amazon and getting ready to pull out the plastic to purchase $100 jeans, new shoes, a new video game, or at the liquor store getting ready to drop $100 on booze, to put it back down, go home, log onto your bank's website, and transfer that amount into savings. If you do not have a savings or money market account or an investment account, get one.
Sorry for being so harsh, but if you aren't able to draw cash for something, it can derail you financially if you put it on credit card. The original $500 expense can quickly become a $600 debt if you do not pay it off, and soon.
Most adults or a family member face a major financial expenditure in any given year. If you are human, have a pet, kids, a house or a place to live, something is going to happen that will cost you money. Better to be able to replace your stove or furnace, like we had to in the past year, than buy the newest gadget. The gadgets are great, but will not cook your food or keep your family warm in a harsh Midwest winter. If you are reading this in Arizona, flip that to a new air conditioner.
So What Am I Saying?
The same thing that I have read in about a hundred self-help type books that I read last year and have continued to read the first quarter of this year.
If you only make $35,000 per year, of course you are not going to be able to save $10,000 per year. But if you make $50,000, you should be able to save one or two grand. Or at least the $500 the article said people did not have saved.
I do not subscribe to the "cut out buying coffee" or "don't go out for lunch" ideas that so many pundits advise. Why bother living if you can't buy coffee out a few times per week or go out to lunch? But by the same token, no need to purchase a $4 latte at Starbucks every day or go out for a $10 or more lunch five days per week. Me spending an extra $4 on coffee for the entire week out of home would be a lot, and I have gone out for lunch an average of once per week for the last fifteen years, and it does not bother me one bit.
I am saying to try to save something. If you read this when it is posted, in late March 2017, you have over nine months left to save $1,000 by January 1st of 2018 if you like that amount. That is $100 per month if you make your first investment before the end of this month, plus $100 per month for April through December. Multiply that by five if you are aiming for $5,000 or ten if you are shooting for ten grand. Divide it by half if you would be happy to have saved $500.
I will close tonight's mini rant by sharing my own savings this month. On the first of the month, I automatically invest $400 in our daughter's 529 account. A post for another day, but that amount has varied and for about four years straight, I automatically invested $500 per month for each of my kids' 529 accounts. You could say that I automatically invested $1,000, or nearly 20% of our take-home pay into our children's college accounts. In retrospect, I would call that excessive, but I am currently able to pay for our son's private college without him borrowing anything.
I have invested in my and my wife's Roth IRA accounts sporadically over the years, $250 here, $500 there, occasionally $1,000 into an account.
After reading Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom At Any Age by David Bach about a year ago, I decided to pay myself first with every paycheck as he advises. I do not invest the amount that Bach would advise for a man my age.
Bach advises for you to pay yourself the first hour of every working day if you are in your twenties, but to pay yourself double that if you are starting late, like I am. Now I am going to share that I do not believe that I will become rich by this method.
Like the 38% in the Bankrate survey who claim too many expenses and the 16% who claim that their job is not good enough, I could not possibly invest two hours worth of pay per day or one quarter of my pretax income into a savings account. That would be great to do that, but that would mean $1,000 of my nearly $3,000 take-home pay per check. I could, but we would get foreclosed on and have to cut out many other things. We could survive on it, but not thrive.
What I actually do is pay myself for the first half hour of the day, typically spent consuming coffee and going through emails, which is roughly $25 out of my $50 hourly pay, or $250 per paycheck.
This month, being one of those rare "three check months" with my paydays having already fallen on the 3rd and 17th, with another scheduled for the 31st, has led me to invest a little extra.
I sent $250 to the Blue Chip Growth fund in my T. Rowe Price Roth IRA on the 3rd, sent a paper check in the amount of $350 to my wife's Vanguard 500 Index fund for her Roth IRA a few days ago, and intend to send $250 to the Capital Appreciation fund, the other half of my T. Rowe Price Roth IRA, next week. I am also stashing away $150 out of the $500 cash that I withdrew. More on that when I have a decent amount to report.
Grand total, $1,250 invested plus $150 cash saved in a month when I also had to make a tuition payment and will be sending almost $2,000 to the IRS. In a month when my wife and I will combine for about $9,000 take-home pay plus a $2,000 transfer from our son's 529 account. I would not put myself in the category of "satisfied with my savings" in the Bankrate.com survey. With twice that amount, maybe.
Sound like a wealthy investor to you? Hardly.
Just a middle aged Middle Class Guy living and working hard in the Midwest.
Ms. Cornfield writes "Bankrate's new survey finds that, for the first time, more Americans feel comfortable with their savings than feel uncomfortable. Yet they don't seem to be saving more. Compared to last year, there's been no improvement in the percentage who say they're not saving anything, and fewer people say they're putting away more than 10 percent of what they earn."
The gist of the article is that people in the survey feel better about their savings, yet have not been saving any more than in prior years.
I can list out the reasons, but they are the same ones that you would guess: 38% due to too many expenses, 16% haven't gotten around to it, 16% job isn't good enough (which is tied in with too many expenses), 13% too much debt, 5% "don't need to save more" and four percent "other."
The percentage of respondents who save more than 10 percent of their income has slipped, from 28 percent last year to 25 percent this year. Almost half of people save 5% or less of their income.
[caption id="" align="aligncenter" width="300"]
Source: Toonopedia[/caption]It seems that middle- and upper-income people have a keeping-up-with-the-Joneses problem. We're talking about households with incomes of $50,000 and higher. Two in 5 of these respondents say the main reason they don't save more money is that they "have a lot of expenses."
Who doesn't have a lot of expenses?
I will share right now that my own family's monthly expenses typically range anywhere from a low of around $6,000 to twice that amount per month. If you are in the upper middle class or upper class (seriously, why would you read this if you are in the upper class?), that might not sound like that much, but to us middle classers, it is a nearly crushing amount.
If I fall off of the money-making treadmill, it would crumble fast.
[caption id="" align="aligncenter" width="400"]
Source: www.pinterest.com/thepeacefulmom[/caption]Even with all of our expenses, I still manage to sock away some money. I am no spring chicken, mind you, but I have always tried to save a little, even when I was a young guy in my early thirties with two kids, a stay-at-home wife and trying to support a suburban lifestyle. I recall some months only being able to invest a hundred or two hundred bucks, but I continued investing more as my income rose.
Also, as you know if you have read previous posts, I drive a car that many folks would be embarrassed to, but I love it. It is a 1998 Subaru. We also still own tube TVs and use pay-as-we-go Tracfones. I do not want to come across as a cheapskate. We have gone on some pretty good vacations, we eat pretty well and we attend a lot of school-related and non-school-related events like concerts and plays.
So this Bankrate.com survey shows that respondents feel good about it at an all-time high for this particular survey.
"The Bankrate.com Financial Security Index reached a record high of 106.5. For the first time, respondents noted year-over-year improvement in all five things we measure to gauge Americans' financial well-being, including: comfort with their savings, comfort with their debt, net worth, job security and overall financial situation. Both men and women indicate improved feelings of financial security over the past year."
I cannot say that I feel this way. I have been reading that the average American who actually has retirement savings has in the range of $60,000. I sure don't have that much saved.
Yesterday's post referenced the 30% who consider themselves upper class (1.8%) or upper middle class (28%). The many people who I know in these income and social classes do, indeed, seem to feel fairly satisfied with their finances as far as I can tell. Higher income people in my workplace and the business owners and professionals that I know personally seem to be taking great vacations several times per year, I can see their new cars, I hear about the upgrades that they are doing with their homes, they get the newest iPhone every year, and their typical outfits cost more than my wardrobe. It must be nice.
On the flip side, the same bank promoting website, Bankrate.com, posted this article two short months ago claiming that six in ten Americans do not even have $500 in savings. How could this be?! Are you, my Dear Reader, in this boat that you could not even swing a $500 car repair? I have to pay for two car repairs in this range, most likely by the end of this month. And that is just the tip of the proverbial iceberg.
[caption id="" align="aligncenter" width="400"]
Source: www.autostraddle.com[/caption]If you cannot come up with $500 in a pinch, but drive a newer car, just went on a Las Vegas vacation, own a high-definition TV or own an iPhone, shame on you!
My suggestion is that next time you are in a store or shopping on Amazon and getting ready to pull out the plastic to purchase $100 jeans, new shoes, a new video game, or at the liquor store getting ready to drop $100 on booze, to put it back down, go home, log onto your bank's website, and transfer that amount into savings. If you do not have a savings or money market account or an investment account, get one.
Sorry for being so harsh, but if you aren't able to draw cash for something, it can derail you financially if you put it on credit card. The original $500 expense can quickly become a $600 debt if you do not pay it off, and soon.
Most adults or a family member face a major financial expenditure in any given year. If you are human, have a pet, kids, a house or a place to live, something is going to happen that will cost you money. Better to be able to replace your stove or furnace, like we had to in the past year, than buy the newest gadget. The gadgets are great, but will not cook your food or keep your family warm in a harsh Midwest winter. If you are reading this in Arizona, flip that to a new air conditioner.
So What Am I Saying?
The same thing that I have read in about a hundred self-help type books that I read last year and have continued to read the first quarter of this year.
If you only make $35,000 per year, of course you are not going to be able to save $10,000 per year. But if you make $50,000, you should be able to save one or two grand. Or at least the $500 the article said people did not have saved.
I do not subscribe to the "cut out buying coffee" or "don't go out for lunch" ideas that so many pundits advise. Why bother living if you can't buy coffee out a few times per week or go out to lunch? But by the same token, no need to purchase a $4 latte at Starbucks every day or go out for a $10 or more lunch five days per week. Me spending an extra $4 on coffee for the entire week out of home would be a lot, and I have gone out for lunch an average of once per week for the last fifteen years, and it does not bother me one bit.
I am saying to try to save something. If you read this when it is posted, in late March 2017, you have over nine months left to save $1,000 by January 1st of 2018 if you like that amount. That is $100 per month if you make your first investment before the end of this month, plus $100 per month for April through December. Multiply that by five if you are aiming for $5,000 or ten if you are shooting for ten grand. Divide it by half if you would be happy to have saved $500.
I will close tonight's mini rant by sharing my own savings this month. On the first of the month, I automatically invest $400 in our daughter's 529 account. A post for another day, but that amount has varied and for about four years straight, I automatically invested $500 per month for each of my kids' 529 accounts. You could say that I automatically invested $1,000, or nearly 20% of our take-home pay into our children's college accounts. In retrospect, I would call that excessive, but I am currently able to pay for our son's private college without him borrowing anything.
I have invested in my and my wife's Roth IRA accounts sporadically over the years, $250 here, $500 there, occasionally $1,000 into an account.
After reading Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom At Any Age by David Bach about a year ago, I decided to pay myself first with every paycheck as he advises. I do not invest the amount that Bach would advise for a man my age.
Bach advises for you to pay yourself the first hour of every working day if you are in your twenties, but to pay yourself double that if you are starting late, like I am. Now I am going to share that I do not believe that I will become rich by this method.
Like the 38% in the Bankrate survey who claim too many expenses and the 16% who claim that their job is not good enough, I could not possibly invest two hours worth of pay per day or one quarter of my pretax income into a savings account. That would be great to do that, but that would mean $1,000 of my nearly $3,000 take-home pay per check. I could, but we would get foreclosed on and have to cut out many other things. We could survive on it, but not thrive.
What I actually do is pay myself for the first half hour of the day, typically spent consuming coffee and going through emails, which is roughly $25 out of my $50 hourly pay, or $250 per paycheck.
This month, being one of those rare "three check months" with my paydays having already fallen on the 3rd and 17th, with another scheduled for the 31st, has led me to invest a little extra.
I sent $250 to the Blue Chip Growth fund in my T. Rowe Price Roth IRA on the 3rd, sent a paper check in the amount of $350 to my wife's Vanguard 500 Index fund for her Roth IRA a few days ago, and intend to send $250 to the Capital Appreciation fund, the other half of my T. Rowe Price Roth IRA, next week. I am also stashing away $150 out of the $500 cash that I withdrew. More on that when I have a decent amount to report.
Grand total, $1,250 invested plus $150 cash saved in a month when I also had to make a tuition payment and will be sending almost $2,000 to the IRS. In a month when my wife and I will combine for about $9,000 take-home pay plus a $2,000 transfer from our son's 529 account. I would not put myself in the category of "satisfied with my savings" in the Bankrate.com survey. With twice that amount, maybe.
Sound like a wealthy investor to you? Hardly.
Just a middle aged Middle Class Guy living and working hard in the Midwest.
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